Housing Market Predictions 2017

What should you expect from the California housing market in 2017?

Price hikes will decelerate in most areas

Coastal real estate markets are normalizing. While California prices will continue to out-perform the rest of the country, we will see more modest appreciation, especially in higher-priced markets like San Francisco. However, watch for home prices to rise faster in “underbuilt” counties, where new jobs greatly outnumber new construction permits.

Affordability is top of mind

Affordability will continue to be a challenge for first-time and repeat buyers, as home supply tightens in more affordable areas outside of large cities. As price increases moderate and wages creep higher, we believe more millennials will leave the nest to seek condos and starter homes.

More in-law units and San Francisco condos, but inventory will lag demand

Inventory will be in short supply, with a few exceptions, such as San Francisco’s strong condo pipeline. A bright spot is California’s new “granny unit law”, which will spark a boom in the construction of in-law units in backyards and basements.

Higher rates, more ARMs, and mortgage interest deduction in play

The Fed plans to raise rates by a quarter point or so a few times this year. Rates will remain at historic lows, but some buyers will be squeezed and turn to adjustable rate mortgages to get into a home. Some speculate that the mortgage interest rate deduction will be on the chopping block when Congress enacts tax reform mid-year. However, this is likely to impact homeowners outside of California’s major metro areas the most. Due to higher debt and deductible property tax, high-value local homeowners will still itemize their tax returns.

Continued expansion, slower job growth overall

Though still ahead of the rest of the US, it is expected that job growth in the state will be moderate in 2017. The majority of experts predict our current economic expansion to continue for another three years, as the tech industry continues to provide strong economic fundamentals. The coming year holds promise, despite uncertainty about how a Trump Administration will impact California’s trade and immigrant labor.

ContactJames Morris with your questions about what to expect in the Real Estate Industry in 2017.